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How To Calculate Prorated Rent

Landlords: Do You Want To Make Life Easier?

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One of the questions that we see asked a ton is “How Do I Calculate the Prorated Rent on My Unit”?

Before we answer that question, let’s answer an important question:

New: Use This Calculator:

What exactly is Prorated Rent?

Prorated rent is how much you, the landlord, charge a tenant when the tenant is occupies the rental for a unit less that specific on the lease.

The most common example is a tenant who starts a monthly or yearly lease in the middle of the month. Normally, you charge them for a whole month, but they won’t be living in the unit for a whole month at some point of the term. Since your daily rental rate is often significantly higher then your monthly rate, you need to prorate the apartment rental.

Why do You Need to Prorate the Rent?

Simple – it’s the honest, fair thing to do. It’s the best method for when tenants want to move in for odd lease durations, or need to get a 4.5 month lease or something similar.

How Do You Prorate the Rent?

There are two popular methods to prorate rent:

1. Number of Days in the Year

While popular in certain segments of the rental industry, it can be confusing to tenants. It’s technically the most accurate for a yearly lease, but can sometimes cause confusion and short change tenants during months with shorter days.

Here’s the formula to prorate yearly:

((Months Rent * 12) / Days in The Year)) * The Number of Days The Tenant Needs to Pay

If we took an example of August 18th Moving in Day, and a monthly rent of $1000, the equation ends up being:

((1000 * 12/ 365)) * 14 =  $460.27

2. Prorate by the Number of Days in the Month

This method is simpler, easier to calculate, and ultimately ends up being fairer to tenants.

((Month's Rent) / Days in the Month)) * The Number of Days The Tenant Needs to Pay

Using our example again from above of August 18th with a $1000/m rental:

((1000 / 31)) * 14 =  $451.61

Notice how the monthly prorated came out to slightly less then the yearly prorated? The yearly prorated will be more on months with 31 days.

The nice thing about the monthly pro-ration is it works extremely well for those who often rent month to month. And since your rents can be all over the place depending on demand, it makes sense to prorate based on the actual month the tenant is renting.

Additionally, it’s dead simple. Your tenants will get it and you shouldn’t have that many problems or pushback from them.

Local Laws and Prorating

As always, check with your local government about specifics related to prorating the rent. In Los Angeles, for example, the courts have decided that a rental month is always 30 days for evictions, so use that for your prorating.

Summing Up About Prorating and Rental/Lease Agreements

Whatever method you decide to use to prorate, be consistent. Specify how you’re prorating in your lease, when you take the prorated rent (some Landlords will prorate a longer term lease on the second month to smooth out income and make sure you can pay the rent), and what method you’ve decided to use to prorate the rent. Once you’ve done that, stick to it!

At the end of the day, prorating is not a difficult concept.

Post in the comments if you have questions or opinions on how to prorate!

 

 

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The Nine Tips You need to Know to go from Amateur to Professional Landlord in No Time Flat

Ask any former Landlord what their biggest issue was, and you’ll always get the same answer: “The Tenants”.

Your tenants are both your greatest benefit (they pay the rent, after all), as well as your biggest annoyance. No one else is going to call you at 3AM because of a leaky Air Conditioning unit, or try and sneak their 200 lbs rottweiler into the building.

Some of us became landlords accidentally, while others entered this business to quit their 9 to 5. Regardless of how, or why, you’re a landlord, the rules for success are the same. And love ’em or hate ’em, a lot of your success is going to focus  on how you deal with tenants.

1. Never be The Final Decision Maker

This is the most important thing any Landlord can do. It’s a well known negotiating technique. Whenever a Tenant has a complaint, simply tell them it’s from the owner. You’re always just the property manager or owner’s representative.  This may require operating the rental under an LLC and a few other notes, but it’s well worth it.

2. Never Stop Learning

Being a real estate investor and landlord constantly requires education and knowledge. There is so much information out there that can help double or triple your real estate business over time. We’re big fans of anything John T. Reed publishes, and of course everything on BiggerPockets.com

3. Know Your Marketplace

Surprisingly, A lot of landlords don’t have a clue about their marketplace. What are the normal rents? What kind of tenants does the area attract? What is included standard with rentals? Who generally pays the utility bills? These are important questions, and the answers differ significantly by region and market. Knowing them is important.

4.Learn Marketing

You’re competing against hundred of other business that offer a similar product, and advertise in the same place. How do you make your ads and your product stand out? In other words, how do you get your listings noticed on sites like Craigslist, Zillow and Trulia? Head to the local library and pick up a book or two on marketing, and get to work.

5. Network Network Network

It’s important to know what’s going in your market, so make sure to network. Networking also helps you find better deals for more properties and services that might not be available elsewhere. Join local apartment associations, find a local real estate investing group on Meetup.com, and of course, check out BiggerPockets!

6. Know the Law

You don’t need to be a lawyer, but you should have a good understanding of local and federal laws. Read up on the Fair Housing Act, your state’s equivalent law, as well as the Fair Credit Reporting Act. Find out what, if any, local ordinances there are, and how they affect you. For example, some jurisdictions require licensing for every unit that you own and rent out. Others prohibit AirBNB. It’s important to research and find out exactly what’s going on in your area. This is another reason why networking and joining a local apartment association can be so helpful.

7. Be Organized

Keep everything relating to your rentals separate and organized. Maintain a calendar and a log book so you can know what happens, when. Consider getting a google voice number so you can track calls but also maintain privacy. 

8. Be Professional

Being a professional Landlord is not that hard. Maintain specific hours of when you are always reachable by tenants, and defer anything outside that time except emergencies until the next time. Create actual policies and stick to them. Not only does this make life easier, it gives you another higher authority to defer to. “I’m Sorry John, we only accept checks and credit cards, no cash. It’s our policy.”

9. Care About Your Properties

Your properties, along with your tenants, are the life blood of your business. You don’t need to coat everything in gold plating, but you need to make sure you offer a quality rental that meets and exceeds renter expectations. It can be simple things like a fresh coat of paint and functioning air conditioning, or even extra add ons like a digital keyhole. The specifics will depend on your budget, your market, and you. The important thing is to go the extra mile and make sure your tenants know you’re doing it for them, too.

 

What are your best ways to improve your rental business? Share in the comments below and on facebook!

 

What’s the Real Cost of AirBNB?

AirBNB is always in the news. There’s constant debate about its affect on rental supply and market rents. This infographic shows you the true cost of AirBNB.

AirBnb_infographic

 

Embed This Infographic On Your Website:

<a href="https://www.rentapplication.com/whats-the-real-cost-of-airbnb/">  <img src="https://d11crtb5sd24b1.cloudfront.net/wp-content/uploads/2015/06/AirBnb_infographic.jpg" alt="AirBNB affect on rental apartments"></a> <a href="https://www.rentapplication.com/whats-the-real-cost-of-airbnb/">How AirBNB causes a rise in rental pricing</a>, courtest of <a href="https://www.rentapplication.com">RentApplication.com</a>

This Map Shows You Every Sex Offender in NYC

New York State, like many states, allows you to search for a sex offender.

The Empire State only lets you map individual sex offenders. You can’t plot a map of all of the sex offenders currently registered around your block or your neighborhood.  For example, if you live on the Lower East Side, you can’t see all the offenders near you.

Until Now.

In an effort to make this data more accessible, we’ve (literally) put every sex offender in New York City on the map. Just click on each point to view pictures, name, offense, and a link to the full rap sheet provided by NYS Criminal Justices.

Important Reminder and Warning

Anyone who uses this information to injure, harass or commit a criminal act against any person may be subject to criminal prosecution.

Want to share this map on your blog? Here’s the code:

<iframe src="https://rentapplication.cartodb.com/viz/ce303a7a-0f6f-11e5-a761-0e0c41326911/embed_map" width="100%" height="520" frameborder="0" allowfullscreen="allowfullscreen"></iframe>
This Map was built and produced by <a href="https://www.rentapplication.com">RentApplication.com</a>.You may redistribute as long as this link remains intact.
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